We've recently covered the massive amount of funding (more than $250 million) poured into third-party solar firms such as SolarCity, Sunrun, OneRoof, and Borrego Solar in just the last few weeks. It's a growth segment in solar and a bright spot in the industry.

In this guest post, Chris Williams offers a contrarian view. -- Ed.

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Here's a crazy thought: we'll know that solar photovoltaics (PV) have become mainstream when third-party financiers are no longer needed.

If our goal is to make solar really cheap, why would anyone want to finance it?

All industry data points to more people financing systems and yes, this is true, right now. But I’m thinking out another five to seven years, not next year.

For example, at $2.00 per watt gross installed costs, why would anyone want to finance solar and save $18.38 (or some other extremely small amount) a month, when they could be saving hundreds? Yes, I understand, they still need to have $8,000 cash, but there are a lot more people who can afford $8,000 than can afford the $20,000 that a 4-kilowatt system costs today.

Even today, I advise all homeowners who ask my advice not to finance a system if they can help it, because they will get much better returns if they pay cash. Homeowners are starting to become smart, as well: if you need to finance, getting capital from Admirals Bank or GE Capital at 8 percent is a much better deal then having a third party own it.

Don’t get me wrong; I’m not hating on financiers. They have done a lot of good for the industry. They have brought the industry scale, awareness, spent tons of money on training and policy that is helping everyone, and created an image of solar as something that is cheap and simple. With that said, it’s possible that they will help to create an industry where they are no longer needed, and that’s a good thing.

Here’s the argument for a long-term decrease in third-party financiers:

Installed costs will continue to decline while electric costs continue to increase. This will make it even more lucrative to own the system.

Financiers currently cherry-pick the best customers -- those with the best FICO scores -- and those are the ones that are the most likely to have the cash to buy a system when costs decline.

Thomas Dinkel, CEO of SunReports, said that people will start buying more solar PV when they realize, like the Germans already have, that it is the safest and most guaranteed investment that you can make -- if you own it. There is not another place you can put your money that has such low risk. If anything, people will start getting capital from regular banks, but at least they’ll still own the system.

Chris Oestreich from SnapNrack said that he feels we will continue to see a gradual decline in prices and cash ownership will likely increase, but he doesn’t think third-party financing will never go away. Chris thinks that once people have a simple payback of four years or less, they’ll go toward cash more often.

James Jenal from Run on Sun feels that community solar will be able to shift the paradigm from financiers owning systems to whole communities owning their system. There is some policy work that needs to happen to make community solar a more viable reality, but James said that community solar has many benefits. The home is unaffected, there are none of the risks of owning a system, and you can buy exactly how much power you need, whether it’s 1.4 kilowatts or 11 kilowatts, depending on your needs and the amount of cash that you have.

Elliot Gansner of Sologico, formerly pvXchange, a marketplace for installers to purchase equipment, had some good insights into the cost changes within the industry. When asked when he thinks solar will be so cheap that financiers will no longer be needed, he said, “I hope we get there soon. All the trends are pointing that way.” He went on to say that the comparison to the German market cost structure is unfair because they are two very different markets. However, he said that equipment costs delivered to the job are getting down to $1.00 per watt for the modules, inverters, and racking.

Gansner thinks $1.00 per watt is possible for all equipment because the manufacturing capacity of the whole industry still is not very large, and we’re not close to hitting the diminishing returns that happens when economies of scale became extremely large.

Gansner said that transaction costs are still way too high due to legal and accounting fees and because of the way we incentivize the industry, with tax credits saddled with transaction costs.

Back to the point about financiers: I don’t think that they are bad for the industry, but it’s an interesting thought experiment to work through. I don’t think they’ll ever go out of business completely, but it’s possible that they’ll have to focus on a different customer base -- those with no cash and poorer credit. Or they’ll focus on different markets, like the inside of the country where installed costs will be higher, because the industry is not as developed and the electric rates are lower.

With that said, I don’t see this change happening for at least three years, but I’m going to be on the lookout for the return of cash sales.

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Chris Williams is the CMO at HeatSpring, a national renewable energy training company, and is a consultant at Voltaic Solaire in NYC. This article originally appeared in HeatSpring magazine and isreprinted with permission.